Intel 2014 Annual Report Download - page 23

We operate our own fabrication facilities and, as a result, are vulnerable to manufacturing-related risks.
Due to the variability in demand for our products, we may be unable to timely respond to reduce costs when demand
declines or to increase production when demand increases.
Our operations have high costs that are either fixed or difficult to reduce in the short term, including our costs related to
manufacturing, such as facility construction and equipment, R&D, and the employment and training of a highly skilled workforce. If
product demand decreases or we fail to forecast demand accurately, we could be required to write off inventory or record excess
capacity charges, which would lower our gross margin. Our manufacturing or assembly and test capacity could be underutilized,
and we may be required to write down our long-lived assets, which would increase our expenses. Factory-planning decisions may
shorten the useful lives of facilities and equipment and cause us to accelerate depreciation.
Conversely, if product demand increases, we may be unable to add capacity fast enough to meet market demand. Our revenue
and gross margin can also be affected by the timing of our product introductions and related expenses, including marketing
expenses.
We are subject to risks associated with the development and implementation of new manufacturing process technology.
We may not be successful or efficient in developing or implementing new production processes. Production of integrated circuits
is a complex process. We are continually engaged in the transition from our existing process to the next-generation process
technology. This consistent innovation involves significant expense and carries inherent risks, including difficulties in designing
and developing next-generation process technologies, development and production timing delays, lower than anticipated
manufacturing yields, and product defects and errata. Disruptions in the production process can also result from errors, defects in
materials, interruption in our supply of materials or resources, and disruptions at our fabrication and assembly and test facilities
due to accidents, maintenance issues, or unsafe working conditions—all of which could affect the timing of production ramps and
yields. Production issues can lead to increased costs and may affect our ability to meet product demand, which could adversely
impact our business and the results from operations.
We face supply chain risks.
We have thousands of suppliers providing materials that we use in production and other aspects of our business. Where possible,
we seek to have several sources of supply for all of those materials. However, for certain materials, we may rely on a single or a
limited number of suppliers, or upon suppliers in a single location. In addition, consolidation among suppliers could impact the
nature, quality, availability, and pricing of the products and services available to us. The inability of suppliers to deliver adequate
supplies of production materials or other supplies could disrupt our production processes or make it more difficult for us to
implement our business strategy. Production could be disrupted by the unavailability of resources used in production, such as
water, silicon, electricity, gases, and other materials. The unavailability or reduced availability of materials or resources may
require us to reduce production or incur additional costs, which could harm our business and results of operations.
We also rely on third-party providers to manufacture, assemble and test certain components or products, particularly for our
networking, mobile and communications, and NAND flash memory businesses. If any of these third parties are unable to perform
these services on a timely basis, we may encounter supply delays or disruptions that could adversely affect our financial results.
In addition, there are regulatory and other requirements, restrictions, and requests from various constituencies regarding sourcing
practices and supplier conduct, with a trend toward expanding the scope of materials and locations where materials originate,
regulating supplier behaviors, and increasing the required disclosures regarding such matters by public companies. Increased
regulation and public pressure in this area would cause our compliance costs to increase and could negatively affect our
reputation given that we use many materials in the manufacturing of our products and rely on many suppliers to provide these
materials, but do not directly control their procurement or employment practices.
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